Chegg Textbook Solutions for Compensation 10th Edition: Chapter 10

Chapter:Problem:

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Question:

As VP of HR at Pilsner Roofing, the eleventh largest roofing company in the world, you are experiencing turnover problems with the employees who actually install roofs (roofers) General Manager Roy Cranston has asked you to fix the problem. While your primary emphasis might be on having a competitive base pay, you need to decide if there is anything you can do in the incentive department. Before you can make these decisions, what information would you like about (a) pay (base + incentive) at major competitors, (b) the nature of the turnover, and (c) next year’s labor budget.

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Pay (base + incentive) rates for similar jobs at major
competitors in the local market are needed. Regional data may also
be required; this depends on the geographic location of Pilsner
Roofing. A salary survey can provide this information. Regarding
turnover, it will be helpful to know if it differs by job, length
of tenure, and by work shift (if different work shifts are used at
Pilsner Roofing). The primary information related to the labor
budget required is whether the budget will include an increase for
next year and the amount of the increase.

In revamping the compensation program, the first step is to
convene a meeting of the involved managers and supervisors to
gather their inputs regarding the objectives of the pay program –
what do the managers and supervisors want? Obviously, they want
lower turnover. Other matters need to be addressed. Should
employees work in teams? Is an incentive plan appropriate? If so,
what type of performance measures should be established? Should the
incentive plan emphasize short-term or long-term performance or
both?

For this case, the following assumptions are made.

▪ Employees will not work in teams.

▪ The primary focus will be on implementing a short-term
individual incentive plan. Since this type of plan focuses on
short-term results, it will have minimal impact on retention so a
long-term incentive plan will also be implemented.

Based on the above, the first recommendation is to establish a
base wage that matches the market rate (based on salary survey
data). Since employees will not be working in teams, an individual
incentive plan must be selected. The most suitable plan is lump-sum
bonuses. Since the target employees, relevant performance measures
focused on this work must be established. These can include
efficiency- and quality-focused measures; for example, number of
roofs installed without damage within a specified time frame (to be
determined by a time study). Based on the study, three performance
levels are determined – minimum, target, and superior. Based on the
labor budget, bonus amounts are established; they will be awarded
on a quarterly basis. The long-term incentive plan will be an ESOP.
Employees will share in the success or failure of Pilsner Roofing
through stock ownership.

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